With Bankruptcy, Can I Keep My Car?

If you have run into financial difficulties, you may be considering bankruptcy as a last-resort option.

You may also be wondering how filing for bankruptcy will affect the rest of your life, including your ownership of your car.

After all, without a car, how will you get to work to continue to pay your ongoing expenses? Fortunately, there are several scenarios that will allow you to keep your vehicle, even after claiming bankruptcy.

Here’s what you need to know about bankruptcy and its impact on your car.

With Bankruptcy, Can I Keep My Car?

Keeping Your Car During Bankruptcy

You can take heart in knowing that you will likely be able to keep your car. In fact, many bankrupt people do.

However, you and your vehicle must meet certain criteria in order to qualify.

Value of the Vehicle

The first point of consideration is the value of your car.

Each year, the Australian Financial Security Authority sets the maximum value for a vehicle you can own during bankruptcy.

In 2018, that amount is $7,900. This amount is based on what a dealer would pay to buy the vehicle from you, not the amount you would pay to buy the car.

Typically, the dealer price is several thousand dollars lower than the amount you would pay.

This calculation also takes into account how much is still owing on your auto loan. For example, if you own a car that is worth $20,000 and you still owe $15,000, the calculated value would be $5,000.

This would fall under the limit, allowing you to keep your vehicle. If, on the other hand, you only owed $5,000 on that $20,000 vehicle, the value would be $15,000.

In this case, you may be required to sell the car to cover your outstanding debts.

You would, however, still be eligible to keep the $7,900 set out in the limit so that you could purchase a less expensive car.

Other Means of Transport

In order to keep your vehicle, it must be your primary mode of transportation.

If you live close to your office and ride a bicycle or walk to work, you would not be eligible to keep your car.

Those who drive to work each day would may able to keep the car as they need it to maintain their employment.

Similarly, if you use your vehicle in the course of your job duties, you would likely be able to keep it.

Ongoing Auto Loan Repayments

If you still have money owing on your auto loan, you must continue to make the repayments after declaring bankruptcy if you wish to keep the vehicle.

Fortunately for many, getting rid of other debts through bankruptcy can free up some of your cash each month, making it easier to keep up with the repayments on the auto loan.

If you do fall behind on your repayments though, the lender can repossess your vehicle as outlined in the terms of your loan.

Your Ownership Portion

In some cases, you may own a vehicle in partnership with someone else, like a romantic partner or flatmate.

In this scenario, you would only own a portion of the vehicle, so only your portion of the vehicle’s value would be used in determining whether or not you are allowed to keep it.

If you are not allowed to keep your share of the car, either the other owner would have to purchase your portion from you or you would be required to sell the vehicle and split the proceeds.

Buying a Car Under Bankruptcy

If you don’t currently own a car but intend to purchase one in the future, rest assured that you can still by a car during bankruptcy.

However, the value must still be under the set limit so you may not be able to get your preferred vehicle if its value is too high.

For free financial advice and more information about bankruptcy, reach out to Debt Negotiators today.

We may be able to assist you with other debt relief options to help you avoid bankruptcy.

Get in touch with us today to get started.


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